Dividend stocks are good assets to own in 2022. Given both economic risks (interest rates, inflation, supply chain) and geopolitical risks (conflict between Russia and Ukraine), the stock market is likely going to be volatile this year.
Dividend stocks are attractive, because they provide dividend returns that help hedge bearish volatility. If your stock goes down, at least you can collect a regular cash dividend as an offset.
Likewise, many dividend stocks are defensive because of their consistent ability to generate cash. Most companies pay a dividend, because they produce more cash than they need to operate and grow their business. That is always a good sign.
Despite the recent bearish market, it appears that stocks are starting to bottom. It has created some attractive opportunities to buy quality stocks at attractive prices. Here are three Canadian dividend stocks I’m considering today.
Royal Bank: A dividend stock for the long term
Royal Bank of Canada (TSX: RY)(NYSE: RY) has recently pulled back around 6% from all-time highs. It is starting to look interesting. With a market capitalization of $194 billion, it is Canada’s largest publicly traded company.
After the pullback, its stock yields a 3.4% dividend ($1.20 every quarter). It has a great history of growing that dividend by around 7.5% every single year. The company has a diverse operational platform that enables it to consistently grow earnings.
The Bank of Canada, just increased interest rates by 25 basis points. Royal should benefit from incrementally higher net interest margins. Royal is not the cheapest Canadian bank. However, it is a high-quality stock that you can tuck away for steady, consistent total returns for years to come.
Algonquin Power: A solid utility with a nice yield
Another dividend stock that has been correcting over the past year is Algonquin Power (TSX: AQN)(NYSE: AQN). Since this time last year, its stock is down over 8%. However, lately, the stock has consistently traded in a range and the downward momentum appears to have subsided. As a result, it looks like an attractive entry point.
Today, Algonquin stock is yielding a 4.6% dividend. That is higher than its historic average yield. Algonquin operates a diverse portfolio of regulated utilities and renewable power projects. Energy demand is recovering out of the pandemic, and the world wants clean power.
Algonquin is right in the middle of this transition trend. It is investing over $12 billion to help decarbonize utilities and build out renewable power projects. Algonquin expects to accrete 7-9% annual earnings-per-share growth from these investments. For a solid income stock with some decent growth, Algonquin is a great stock to buy at the bottom.
Calian: A growth, value, and dividend stock
Calian Group (TSX: CGY) is not a high-yielding dividend stock. It only pays a 1.9% dividend today. However, I like this stock for several reasons. Firstly, it is one of a few defence-focused stocks in Canada. Around 50% of its revenues come from government and defence-related contracts.
Several of its operations are focused on provided training, healthcare, advanced technologies (think satcom), and IT/cybersecurity for military and defence clients (Canadian military, NATO, etc.). Given the current global geopolitical tensions, spending on defence training and technology is expected to drastically rise.
Secondly, Calian is just a well-managed company. It has a great balance sheet, and it has growth levers both in the private and public sectors. For a business growing at about 20% a year, it only trades for an enterprise value-to-EBITDA ratio of 10. For growth, value, and income, this is a solid Canadian dividend stock to own in 2022.
